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Parliament may ask the competition watchdog to investigate the sector dominated by only four players, Senator Deborah O’Neill says.
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ACCC could probe ‘oligopoly’ of big 4 audit, inquiry hears
04 March 2024
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The possibility of an ACCC investigation of the big four has emerged during an inquiry into the sector due to concerns their behaviour in the audit market resembles an “oligopoly”.
The idea was first raised by EY, which submitted to the inquiry that “the audit market is subject to intense competition and would welcome a specific inquiry from the ACCC that addresses any concerns the committee may have”.
Labor senator Deborah O’Neill asked representatives from the competition watchdog on Friday whether an investigation was warranted given the significance of one of the four firms that benefit from the market concentration suggesting one.
Tom Leuner, ACCC general manager of mergers, said that based on the submissions made to the inquiry “it is clear that for big companies, the market does seem reasonably concentrated”.
“That's an observation I’m just making in a general sense,” he added.
The big four firms dominate the country’s audit and assurance sector, responsible for 97 per cent of external audits for ASX 300 companies, according to the ABC, and raking in billions every year while doing so.
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An ACCC investigation into the big four firms would enable the ACCC to use its broad information-gathering powers, enlisting the help of data specialists and legal experts, to interrogate the sector’s competition for the first time.
“All these sorts of investigatory tools that we use and we’re accustomed to using are brought to bear on the inquiry, or as part of the inquiry. That I think is the fundamental benefit of an ACCC-style inquiry,” Leuner said.
General manager of competition enforcement Richard Fleming refrained from giving his assessment of the state of the audit sector since the ACCC generally does not “get involved in assessing the level of competition in the market unless we have an inquiry role or we’re investigating”.
But to the knowledge of Leuner and Fleming, EY had not communicated its recommendation to the ACCC.
“Generally, those inquiries are initiated by the Treasurer. So, it's unlikely that we would be the initial recipient of those letters, but it's possible, but I'm not aware of it,” Fleming said.
O’Neill said: “It'll be interesting to see if they've actually communicated with you that it must be their view that there is what the rest of us might call behaviour that is akin to an oligopoly, which is why the ACCC might come in and ensure that sufficient competition.”
“If EY holds that view at a high level, and if they are willing to put it in a submission to us, it would seem that they should have communicated that to you, in my view.”
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